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Mortgage in Uzbekisan 101



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By : Bekzod Ruzmetov    99 or more times read
Can I afford mortgage / Do I need mortgage?

Before commencing on a mortgage quest, and piling up required documents, which will be reviewed in no time, we will look into mortgage terms, payment options and reveal key observations pertaining to mortgage in Uzbekistan.

There are two payment options available for a mortgagee, consequently two methods of calculations that will lead to either more or less gross payment. So, your choice matters to your pocket now.
Your options are between annuity (also known as “Аннуитет”) and simple r% (also called as “Простой метод”). Since it rolls up to a more gross payment with annuity method, people prefer simple r%/“Простой метод”. In fact, my interviewee at “Ipoteka Bank” could not recall anyone choosing annuity payments.

Observation № 1: Annuity method costs you more, thus the majority choose simple r%.
Payment story unfolds as follows:

PARAMETERS ANNUITY SIMPLE R% SIMPLE R% WITH GRACE PERIOD
Property value 60,000,000 60,000,000 60,000,000
Down payment (25%) 15,000,000 15,000,000 15,000,000
Principal amount 45,000,000 45,000,000 45,000,000
Mortgage period 15 years 15 years 15 years
Interest rate 14% 14% 14%
Coupon payment 599,284 513,958 566,458
Total payment 107,871,052 92,512,500 101,962,500

It probably drew your attention that payment option with grace period is not favoring your budget. In fact you end up paying more on interest. Where it comes handy is less gross payment amid the grace period, but more to pay in the future. Thus, rather than having attractive words finalize your decision, being skeptical and using the mortgage calculator is your precaution.

Observation № 2: Grace period is not grace in mortgage payments as you end up paying more in this method.

What if banks make “lucrative” offers along with mortgage?

Indeed, mortgage banks do so. Yet if you remember, there is no free lunch. Given the property value of, say, $100,000, local banks (not all) require you to deposit $25,000 at least and promise 14% return (or different rate not exceeding mortgage interest rate) on it, meanwhile you are charged 20% on property value. Suffice it to say, your deposit costs more than it earns and your hidden “benefits” are actually extra burden.

Observation № 3: …deposit costs more than it earns and your hidden “benefits” are actually extra burden.

Ready for paperwork?

Regardless the observations above, if your major goal is cost allocation, finding a mortgage property is your next challenge. Secondary market is virtually void under mortgage, and available options are in the primary market, emanating highly priced apartments. Well if you get lucky enough below are the documents to prepare to apply for mortgage:

  1. Letter of intend
  2. Passport copy
  3. Letter on income from permanent and secondary sources for the last 12 months
  4. Residence status confirmation letter
  5. Report from a certified appraiser on property’s value
  6. Down payment not less than 25% from the value of a property

In preparation of the above documents the mortgagee will have to pay for:

  1. Independent appraiser fees
  2. Notarial authentication of buy-sell contract
  3. Insurance fees

Observation № 4: Limited properties under mortgage

Am I eligible?

Once you are off the woods and submitted all the required documents, the bank will consider your eligibility within five business days. If your down payment is less than 50% of the property’s value, mortgagee’s credibility is rated by income report, if the down payment exceeds 50%, mortgagee’s solvency is attributed to the employer’s credibility.

Observation №5: Mortgage eligibility criterion shifts from mortgagee’s income report to employer’s solvency if down payment exceeds 50% of the value of a property.
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